Thursday, May 26, 2011

Lighting a Fire Under Microsoft

By Eric Jackson
RealMoney Contributor

5/26/2011 1:45 PM EDT
Click here for more stories by Eric Jackson

I was surprised that David Einhorn spoke out so strongly against Steve Ballmer's leadership of Microsoft (MSFT - commentary - Trade Now) yesterday during his presentation at the Ira Sohn Conference.

Einhorn certainly doesn't mind taking poor management to task -- he famously did so with Lehman Brothers and The St. Joe Company(JOE - commentary - Trade Now) -- but he doesn't usually do it for his long investments. He's not an activist investor in the spirit of Carl Icahn or even his friend Bill Ackman.

Maybe it's because he's been a fan of Microsoft for more than five years -- he once famously compared it to Alex Rodriguez of the Yankees, a comparison he'll likely want to update after buying part of the Mets today -- and he's frustrated that the stock is flat over that period (not including dividends).

But he certainly came out swinging yesterday, saying that 10 years had been long enough for Ballmer to show his stuff to investors. He also called the senior team at Microsoft "Charlie Brown management."

But I don't believe this is the start of a long activist battle between Einhorn and Ballmer. I don't believe he's considering a proxy fight. Why? Steve Ballmer is not going anywhere until Steve Ballmer is good and ready. This is a guy who owns 4.75% of the entire company. (For comparison's sake, Bill Gates himself owns 7.2% of Microsoft.)

Ballmer is effectively a co-founder. Just as with Jim Balsillie and Mike Lazaridis at Research In Motion (RIMM - commentary - Trade Now), Ballmer has assembled his board. He's sold them on his strategy, and he has their backing.


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